Social Networks in Marketing - Essay Example

?Social Networks in Marketing Introduction The increasing power of consumers has significantly reshaped business distribution and marketing models. In turn this has required retailers to add value in stores to compete with the multiple retail channels and highlighted the need for businesses to adopt customer relationship oriented approach in order to create value for the consumer (Merz, He & Vargo 2009). It is evident that retailers are now moving away from the conventional economics based approach to consider the benefit of integrating effective customer relationship management (CRM) into business strategy to create value for its customers. To this end, Pine et al highlight that the role of CRM has been to reshape conventional marketing strategy by focusing on “mass customization” instead of mass marketing (Pine et al, 1995). In turn, the relationship between consumers and branding is arguably paramount in determining the centre of how value should be marketed to retain and persuade new customers (Merz, He & Vargo 2009). Therefore, the increase of consumer power arguably forces organisations to undertake a more lateral approach to marketing as opposed to merely focusing on competitors (Avlonitis & Indounas, 2007). This argument is reinforced by the proposition of Weinberg et al that organisations shouldn’t assume what the customers want, but that it is imperative for organisations to add value in addressing consumer needs to survive in the multi-channel marketplace particularly in light of the growing influence of social networking on consumer choice (2007). With regard the contemporary business environment the application of CRM is also impacted by the increase of online business and in particular social networking (Cova, 2006). The ecommerce business model has dramatically reshaped consumer consumption and the classic bricks and mortar business mantra of “location, location, location” (Chaffey, 2006). As a result, consumers have increased control and therefore an application of traditional vertical integration will not suffice in attempting to launch the business online. Nevertheless the low economic barriers to market entry and access to a potentially global demographic of consumers, renders the ecommerce paradigm a significant business opportunity if exploited correctly (Cova, 2006). Therefore it is important for businesses to understand the internet medium to apply CRM effectively in the current retail climate with reference to the power of social networking. This is particularly important in light of the strategic driver of the internet medium being information sharing and increased knowledge as highlighted by the social networking phenomenon (Cova, 2006). For example, the incoming of the second media age and multiple digital platforms has created new societal trends and business opportunities through the multimedia business model, which has challenged pre-existing methods of information dissemination (Volmer & Precourt, 2008). On one side of the spectrum this has led to increasing commercialisation of the customer, which is further reflected by changing consumer habits and multi-chain retail strategy (Volmer & Precourt, 2008). On the other side of the spectrum, the digital era has redefined how the people interact with each other, thereby marking a shift in societal relationships and trends, which in turn informs cultural norms and enables innovation in building consumer/business relationships where the objective of marketing strategy should be to ensure that consumers are at the core (Beckett & Nayak, 2008). This paper critically evaluates the impact of social networking on marketing strategy. It is submitted at the outset that whilst increase of consumer control has been acknowledged in academic discourse, there has been some debate as to the role of social networking and its inclusion in marketing strategy to reflect increased consume power (Saren, 2007). For example, Brown (1992) had argued that the postmodern socio-economic paradigm has led to an increased focus on marketing practice as opposed to a re-evaluation of marketing theory however this observation was made in 1992. To this end, it is submitted that the reality of the impact of social networking requires businesses to integrate social networking strategy into the marketing mix for sustainability and increased long term growth prospects (Cova, 2006). 2. Social Networking and Consumer Power The social networking phenomenon has radicalised communication modes, with the inception of chat rooms, email, instant messaging and blogs (Volmer & Precourt, 2008). In turn these novel communication modes have reshaped social interaction in the contemporary social framework within the continuous movement towards global homogenous cultural paradigms and international business networks (Volmer & Precourt, 2008). Indeed, Volmer and Precourt (2008) refer to the comments of a 2007 interview with Nike vice president Trevor Edwards, who commented that “gone are the days of one shoe, one advertising campaign, Now you’ve got to engage consumers on every level” (In Volmer & Precourt, 2008, p.2). As a result, the manner in which consumers online are purchasing has significantly changed. They often seek out reviews and social networks to get peer recommendations on products and therefore any company marketing online has to understand the complexities of the medium and the increased power of consumers and adopt this in CRM management and as part of contemporary marketing strategy (Fox, 2009). Indeed, leading marketing expert Seth Godin highlights the weakness of applying traditional marketing and conventional vertical integration to online marketing on grounds of what he terms the “meatball sundae” principle (Godin 1999; Godin, 2008). Godin utilises the metaphor of a meatball sundae to suggest that traditional marketing principles will not work in the online business model because of the completely different nature of the medium to conventional bricks and mortar business. As such, Godin argues that marketers attempting to apply conventional vertical integration often fail online and end up creating a “meatball sundae” effect (Godin, 2008). Therefore, this reiterates the importance of business understanding the medium and its audience (Cova, 2006; Shih, 2009). For example, a strategic driver of the internet economy is the value of a network, which is linked to market shares and therefore this correlates to the increased connection of users (Godin, 2008). As a result, the more users who connect and are part of online networks; the more valuable it becomes for companies to understand this and cater to this communication shift in marketing online (Fox, 2009). This is particularly so as ecommerce has enabled consumers to buy goods from anywhere and anyone (Carbone, 2004). Furthermore, is evident that the difficult economic conditions have created changes in consumer attitudes towards price sensitivity with consumers increasingly attracted to discounts and money saving initiatives (Aktas, 2010, p.19). Additionally, the contemporary marketplace has seen the phenomenon of social networking and media revolutionise how people communicate with each other (Saren, 2007). From a business perspective, this has implications for consumer relationship management as the control is increasingly with the consumer. For example, Seth Godin highlights that people are more likely to seek peer reviews of services and products in the increasingly networked environment, which has implications for businesses particularly when dealing with complaints (Godin, 2008). A prime example of one of these levels is the immediacy of the social network Twitter, which enables instantaneous connectivity with consumers. As such, Comm et al highlight that “businesses can harness the immediacy of Twitter to innovate and build relationships like never before” (2009, p.xiv). The potential of Twitter as a business tool is facilitated by the globalisation phenomenon, which encompasses integration of political and cultural and social economic aspects of regional and local territories via contemporary global methods of information exchange (Croucher, 2004). Indeed, Croucher posits that globalisation is fuelled by the interrelationship between various central trigger factors including economic, technological, socio-cultural, political and biological factors (Croucher, 2004: 10). Moreover, the use of internet for social communication in conjunction with the Web 2.0 application has facilitated the development of social networking platforms for online interaction; business networking and user generated content sites. In particular, the online social network model has resulted in the phenomenon of leading social networks such as MySpace, Bebo, Facebook and Twitter (Shih, 2009). In general terms, these leading social networks enable individuals to share information about themselves, hobbies and interests and additionally have redefined business strategy and traditional social interaction modes. As such, it is submitted in this paper that the social network phenomenon exemplifies the interrelationship between business networking, social communication, cultural norm shifts and the shaping of self identity within the globalisation paradigm. In turn, when applying or considering the integration of social networking into marketing strategy, the focus needs to be on socialising through the medium as opposed to applying a conventional marketing approach (Cova, 2006; Godin, 2008). This argument is highlighted by reference to the diverse complexity of social networking platforms. For example, whilst Facebook and Twitter are arguably the most popular social networking platforms; it is evident that in the last three years social networking models have continued to change and appear to moving towards a more instantaneous and tailored approach with the proliferation of bespoke social networks such as Ning, CollectiveX and KickApps (Fox, 2009). These networks enable signed up users to set up their own networks according to personal interests and immediate connectivity through continuous updates. Therefore whilst the sheer vast numbers of social networking and intrinsically innovative nature of this phenomenon renders it difficult to predict the future trends in social networking; the immediate future would suggest that social networking is becoming increasingly bespoke and tailored to individual interests with the public increasingly autonomous in their choices. As such, online marketing initiatives are imperative for building businesses particularly in the retail sector (Fox, 2009). However, whilst Facebook and MySpace have been obvious points of recourse for such online marketing strategy, the value of Twitter has been less obvious. In contrast to MySpace and Facebook, Twitter is restrictive in terms of user generated media content and not intrinsically commercial in nature (Shih, 2009). Nevertheless, it is submitted that the key feature of Twitter beneficial to business growth is the ability to find and develop personal relationships with new customers, which is imperative in light of the increasing autonomy of consumers in the online marketplace. This proposition is further supported by Comm et al’s personal account of Twitter’s utility: “it’s helped me to build deeper relationships with my partners, my clients….. it’s extended the reach of my brand, making the name of my business known to people who might never otherwise have heard of it” (Comm et al, 2009, p.xvi). 3. Impact of Social Networking on Conventional Marketing Strategy Whilst the social networking phenomenon clearly enables businesses a much wider level of access to potential customers; the increase in networking and peer to peer information dissemination has led to an increased expectation that news and content should be free (Shimp, 2008; Gupta, 2009). Furthermore, the increase in consumer control has led to consumers wanting more information before purchasing and the availability of free information has led to an expectation of free content (Volmer & Precourt, 2008). Accordingly, the increased consumer control and expectation of certain content being free clearly impacts the traditional method of advertising and marketing as a result of changes in consumer expectation. For example, business leader and Squidoo creator Seth Godin refers to the fact that consumers are more likely to be influenced by friend recommendation on Facebook or Twitter than conventional advertising methods (Godin, 2008). As a result, the central issue facing content providers and advertisers in particular is how to adapt to the interrelationship between multi-chain strategy, increased consumer control and novel methods of communication for monetization and brand development, which reiterates Cova’s point that the new mediums are essentially social in nature (2006). Therefore, whilst social networking platforms offer immediate access to a massive potential marketplace, Cova highlights the point that the marketing focus should be on adapting to the social nature of the medium as opposed to applying conventional marketing theory and strategy concepts (Cova, 2006). Therefore, it is submitted as a central proposition in this paper that whilst current consumer behaviour trends challenge the traditional business model of advertising, failure to understand consumer behaviour and the novel methods of distribution is potentially disastrous to marketing strategy (Cova, 2006; Godin, 2008). It is further argued that if the new medium of distribution is understood and used correctly, the increasing consumer demand for free information and freebies can be used to a content provider or advertiser’s advantage to increase readership, sign ups and product conversion rates. Additionally, the changing nature of social networking and its continuous innovation to address individual needs highlights the increasing power of the public in social networking. As such, the future of social networking suggests a privatised reshaping of social identity in the online arena, with the “individual” remaining at the fore (Volmer & Precourt, 2008). This reinforces the importance of fostering personal relationships with potential customers. Simultaneously this highlights the inherent difficulty in predicting future models of social networking due to the element of innovation meeting subjective needs of the target public (Rutledge, 2008). It is further submitted that appurtenant to the correlation between social networking and social identity construct is the inherent differences in uses of online networking platforms depending on age, demographic and culture; which in turn challenges pre-existing theorem pertaining to cross-cultural communication, particularly in international business and conventional marketing strategy (Rutledge, 2008). Therefore, whilst the social networking model enables easier business access to a wider market; the key issue for businesses is the best way to tap into this marketplace (Fox, 2009). For example, if we consider the evolution of the social networking model, there has been an increasing move towards a private model of social networking through the popularity of sites such as Ning, KickApps and CollectiveX, which clearly has raises the importance of networking for business opportunities in a way that is more obvious than Twitter. Nevertheless, it is submitted that the defining aspect of Twitter in contrast is the fact that it is ultimately a communication tool which enables continuous direct communication with the public. Whilst other social networking sites can be geared towards selling products, Twitter’s utility to business is intrinsically based on the ability to build a following and friends’ base and “become the first stop for the products or services they need” (Comm et al, 2009, p.xix). Accordingly, it is submitted that consideration of social behaviour is arguably at the crux of how social network entrepreneurs innovate novel online social networks and indeed how businesses in general can tap into this phenomenon, particularly through Twitter (Fox, 2009). This proposition is further supported by the fact that the creation of personal spaces online and the continuous changes in the social networking interrelationship with recent usage trends towards creation of private cultural spaces and user generated content, clearly points to the complex multifarious uses of online social networking. For example, the Ofcom 2008 Report on Social Networking, Attitudes and Behaviours (2008), suggested that social networking sites: “offer people new and varied ways to communicate via the internet, whether through their PC, or their mobile phone. They allow people to easily and simply create their own online page or profile and to construct and display an online network of contact often called “friends” (2008, p.4). This in turn reinforces the importance of acknowledging increased individual autonomy in using social networks such as Twitter as part of contemporary strategy and correlates to Benkler’s argument that autonomy “underlies the efficiency and sustainability of non-proprietary production in the networked information economy” (2006, p.356). Accordingly, it is submitted that this increased autonomy has redefine the social concepts of self-identity in the networked environment (Cova, 2006). Therefore, the efficacy of social networking as a business tool is not only dependent on approaching social networking as a part of customer relationship management strategy but also to recognise the redefined concepts of self-identity of individuals as part of targeting and communicating with potential customers through “societing” in social networks (Cova, 2006). For example, Comm et al highlight that Twitter is a prime example of the potential of adopting a social approach to marketing. To this end, Comm et al posit that the dissemination of free and useful content through Twitter enables content providers and advertisers to build trust with consumers, which in turn increases customer retention rates and value for the customer (Comm et al, 2009). Therefore, whilst the social networking model enables easier business access to a wider market; the key issue for businesses is the best way to tap into this marketplace. For example, if we consider the evolution of the social networking model, there has been an increasing move towards a private model of social networking through the popularity of sites such as Ning, KickApps and CollectiveX, which clearly has raises the importance of networking for business opportunities in a way that is more obvious than Twitter. Furthermore, the proliferation of the Internet and online growth has facilitated novel societal trends and business opportunities through the piecemeal evolution of electronic commerce, thereby creating a new social and business model accommodating the contemporary market. The creation of multi-faceted digital space has seen a significant uptake by individuals on a global scale, thereby perpetuating a domino effect on culture, sub-cultures (particularly youth culture) and social behaviour through the “commercialisation of customers” on the one side to changing communication trends with social networking sites such as Facebook and MySpace and Twitter on the other (Cross, 2004, p.3). Moreover, the digital business model has led to market segmentation and a changing consumer market, forcing retailers to adopt a multi-retailer strategy geared towards an increasingly autonomous and savvy customer (Levy & Weitz, 2008: 27). This has in turn created polarity in debate relating to the wider impact of social networking, particularly in light of continuous innovation in social networking models (Fox, 2009). For example, the diversity of social spaces through networks such as Twitter, internet chat rooms and MySpace for example not only changes the way in which individuals interact, it provides a backdrop for a multitude of complex interrelated factors, which are difficult to monitor (Barabasi, 2003, p.10). This is further evidenced by the fact that the trends in recent social networking suggest that new models attempt to apply innovation to forecast individual user needs, which is arguably fundamental to the continued development and growth of social networking platforms. For example, whilst Facebook in general terms was set up to enable people to socialise online, the continuing development of applications has demonstrated an increasing relationship between the popularity of online gaming being incorporated into social networking (Fox, 2009). Moreover, appurtenant to this is the fact that a significant percentage of the demographic of these networks are within the 16-35 bracket, thereby highlighting the interrelationship between social networks, branding and the commercialisation of the customer (Bennett, 2008:33-34). Indeed, Bennett posits that the extension of brand awareness into social networking offers the most effective means of targeting a mass demographic, which in turn has important implications for business strategy within the contemporary organisational framework (Bennett, 2008:33). If we consider this contextually with regard to Twitter; whilst this social network is essentially a communication tool, it has also followed suit and implemented add on applications. However, the Twitter network additionally enables individuals to infuse the personal relationship element into business growth. A central element of the digitisation of business has been to fuel multiple distribution channels, which in turn has forced retailers to adopt a multi-retailer strategy (Levy & Weitz, 2008: 27). This has led commentators to recommend the organisational use of customer relationship management strategies to address the challenges of the multi-channel retail marketplace (Levy & Weitz, 2008, p.27). Within this contextual backdrop, Twitter arguably is an extremely viable option for contemporary customer relationship management strategy as “people always prefer to do business with people they know; and they get to know them by talking to them and swapping ideas with them” (Comm et al, 2009, p.xix). Therefore, Twitter not only enables this on the Internet, the Twitter model also exemplifies the interrelationship between an increasing media influence on the public and exploitation of potential business opportunities. This in turn correlates to Benkler’s argument that the manner in which information is produced and exchanged in society is fundamental to interaction and how societies see the world and has fuelled consumer’s increasing expectation that information and content should be free (2006). To this end, Benkler highlights the point that: “We are beginning to see a series of economic, social and cultural adaptations that make possible a radical transformation of how we make the information environment we occupy as autonomous individuals” (Benkler, 2006, p.1). Moreover, Benkler highlights the point that technological change, economic growth and social practices are inherently intertwined in facilitating novel opportunities in business (Benkler, 2006, p.3). Additionally, the crux of Benkler’s argument would suggest that modes of information exchange and cultural norms intrinsically dictate business growth particularly in the retail market, which further supports the argument in this paper that the consumer expectation of free information and content can be exploited by content providers and businesses in the online marketplace; particularly if they understand the medium (Cova, 2006). For example, Benkler opines that the renovation of information exchange in the digital era have impacted non-market and non-proprietary production, resulting in increasing business success being attributable to the fostering of effective customer relationship management (Benkler, 2006, p.4). To this end, Benkler postulates that “together they hint at the emergency of a new information environment, one in which individuals are free to take a more active role than was possible” (Benkler, 2006, p.2). Moreover, Benkler argues that the networked public sphere and social networking model has moved traditional controlled media model into the increasingly autonomous public; thereby opening up the markets ripe for business exploitation (2006, p.146). However, this has fuelled debate as to the appropriate method of using social networking for exploiting business opportunities (Brown 1992; Cova 2006). For example, whilst Twitter is a free network and enables contact with a massive demographic through the bypassing of exorbitant marketing costs; the question remains as to how can businesses use Twitter in a manner that actually converts social contact and online relationships into profitable sales (Meyerson, 2010). This issue is further compounded by the inherent complexities of social networking use with the creation of “lifestyle enclaves” (Bellah et al, 1998: 335 in Andersson, 2002:104). This in turn has a concomitant impact on the future of social networking through Andersson’s proposition of “pscyhographic segmentation” (2002:104). Therefore, in maximising the use of Twitter and indeed any social networking as part of marketing strategy; businesses need to be aware of the continuously evolving model of social networking to ensure a multi-layered strategy in social networking marketing (Cova, 2006). For example, whilst research into social networking tends to focus on social networking through the circle of friends’ model; this ignores the continuing impact of user generated content sites, which is growing exponentially (Dovey et al, 2009:152). Additionally, with regard to the online marketplace, the proliferation of novel communication modes and online networking has resulted in multiple distribution streams, challenging pre-existing methods of information dissemination (Kelsey, 2009). In particular, the growth of social networking, development of user generated content and ability of file share online fuelled the peer to peer file sharing phenomenon. This in turn correlates to Rutledge’s argument that: “To create a social networking campaign that really generates results, you have to understand …the growing popularity of user generated content. Social networking sites are built on a business model that emphasises user generated content. In other words you don’t visit MySpace to see what staffers of these companies have to say, or to read the words of professional writers. You visit these sites to connect with other people and collaborate on ideas”(2008:92). As such, it is the heightened individual control that is the key to success of any marketing strategy incorporating social networking models going forward and content providers and businesses must understand this to provide cater to the increasing demands of the consumer (Cova, 2006). Indeed, Anderson suggests a radical approach to business in the online environment in “Free: the Future of a Radical Price” (2009). The central premise of Anderson’s argument is offering products for free to secure customer loyalty. To this end, Anderson argues that “free is the best form of marketing – we know this. We have free spritzes of perfume in the department store, free samples of muffins…. But with digital stuff, it can be 90 per cent free, 10 per cent paid” (2009). Furthermore, Anderson argues that the extent of people reached online and low distribution cost renders the “free” concept a viable business model on grounds that if a large audience number can be reached, the potential dividends are huge. Accordingly, in context of Anderson’s free proposition, the advantage of the social network Twitter is the ability to attract the large demographic whereby “ten per cent of a big number, is a big number” (Anderson, 2009). 4. Conclusion The above analysis demonstrates that whilst social networks are used to interact with other online users, reasons for use of social networking and preference of certain networks over others are inherently complex. Nevertheless, the literature clearly demonstrates that social networking has altered social behaviour and the contemporary approach to framing identity in line with Benkler’s model of the networked social environment. Moreover, the above analysis highlights that the range of issues covered by the title “online social networks” is intrinsically wide and complex. In line with Benkler’s early extrapolations, the digital era is clearly converging towards the global village paradigm. Directly correlated to this is the increasing relevance of social networking in business particularly as a result of increasing individual autonomy and changing consumer behaviour (Prince, 2010). To this end, it is submitted that the utility of online communication channels such as social networks as a customer relationship management tool, is arguably instrumental to contemporary business marketing strategy. This further demonstrates the increasing power of individuals in shaping innovation in online social networks and reinforces the importance of social networking addressing macroeconomic realities in order to remain useful as a business tool. For example, it is submitted that the new communication methods such as Ning and Twitter exemplify the crucial factor in future development of successful online social networks; namely, the importance of marrying popular online trends, user preferences and user generated content that is targeted to user preferences. Therefore, whilst the circle of friends’ approach of Twitter remains relevant towards fostering personal relationships important to the contemporary consumer; the continued efficacy of social networks as a tool to build business must account for the evolving future social network model. BIBLIOGRAPHY Atkas, A. (2010). Analysis of Current Mobile Marketing Applications, GRIN Verlag publishing Anderson, C. (2009). Free: The Future of a Radical Price. Hyperion Avlonitis, G., & K. Indounas, “Service Pricing: An Empirical investigation. Journal of Retailing and Consumer Services”, 14 (2007) 83-94. Barabasi, A. (2003). 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